Cheap Food Blunts Crisis...

The global recession is bringing Bangladesh such problems as dwindling exports and foreign remittances, but Prime Minister Sheikh Hasina's government should weather the storm, analysts and experts say.

They base their hopes largely on agriculture, the biggest employer in this disaster-prone South Asian country of more than 140 million people.

Declining food and oil prices globally, along with a bumper rice harvest, have pushed prices in domestic markets down substantially, and helped shield the country from economy-linked social unrest and protests.

Though around 40 percent of Bangladeshis live on less than $1 a day, good crops over the years have generally ensured at least subsistence.

There have been virtually no instances in Bangladesh of spontaneous violent protests purely driven by hunger, a senior government official told Reuters, asking not to be identified.

"Bangladeshi people generally dislike violence but are often pulled into it by the over-zealous and vengeful politicians," he said.

Bangladesh was lucky to have its food basket nearly full following a bumper rice harvest last September and hopes for another bumper yield from the crop due in the next few weeks, although the country is prone to natural disasters like flooding and cyclones that can quickly knock such forecasts awry.

But if all goes well, agriculture officials say, the country will have produced around 30 million tonnes of rice, the country's main staple, in the current fiscal year to June.

"We only pray for nature to bless us," said Abdul Mannaf, a farmer in the rice-growing northeastern district of Sylhet.

The global financial crisis has started hitting two other main strands of the Bangladesh economy as earnings from textiles, the leading export, as well as remittances from overseas workers drop.

"But these have not been too much a worry yet," Finance Minister Abul Maal Abdul Muhith recently told reporters, adding the government is working to face the problems.

The authorities have ignored demands by exporters to devalue the Bangladesh taka against the dollar, which has encouraged 5.6 million expatriates to keep sending remittances regularly, one central bank official said.

Politics

Bangladesh hoped for a stable run of democracy -- following two years of rule by an army-backed interim government -- when Hasina took office in January after a landslide election win. She promised to ensure good governance, improve the economy and reduce poverty.

But her efforts suffered an initial blow when paramilitary troops, the country's second line of defence, mutinied and killed at least 57 army officers commanding them in February.

Rivals blamed Hasina for poor handling of the mutiny, and raised questions about her ability to run the country smoothly.

The global financial meltdown posed another challenge for Hasina.

The textile sector, which employs 2.5 million workers, has asked the government for a bailout package including cash incentives, bank loans with lower interest and other incentives.

While a government-appointed task force is working to address the issue and other economic concerns, the authorities have started selling rice at fixed prices to low-paid garment workers and others who earn small wages.

The authorities have allotted 400,000 tonnes of rice to be sold at 16 taka ($0.23) per kg against 22/23 taka in the retail markets. But there are few buyers, witnesses said.

This is because the rice price has dropped in retail markets to the level of what the government offered as farmers and wholesellers released stocks ahead of the next harvest, traders said.

"With people having no complaint of hunger, Hasina's rivals would probably find no ground to launch unrest on economic concerns," said Raisul Islam, a private banker.

Atiur Rahman, Dhaka University professor and economist, said lower import costs, especially of fuel and food, had eased the burden on the government.

However, attracting aid and investment -- which provide a lifeline for growth and development -- could still prove difficult because of the global crisis and domestic political uncertainties, analysts said.

Bangladesh gets between $1.5 and $2 billion a year from the World Bank and other donors for development, while $14 billion from exports and $9 billion from remittances are other pillars of the economy.

"(A) prolonged global recession would definitely hit our exports and remittances badly, and could fuel social unrest," Kazi Kholiquzzaman Ahmed, another economist, told Reuters. On the political front, a concern for donors who want a stable government on a clear democratic path, the February mutiny raised questions about relations with the army and other security forces in a country that has seen numerous military coups, and Bangladesh also faces problems with violent Islamic militants.

The Bangladesh central bank expects gross domestic product growth of around 6 percent in the current fiscal year to June, down from 6.2 percent in the previous year but up from a recent World Bank forecast of less as 4.5 percent, which would be the lowest in seven years.

(Reuters)

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